Megaworld Globus Asia, Inc., Petitioner, Vs. Mila s. Tanseco

8/10/2019 Megaworld Globus Asia, Inc., Petitioner, Vs. Mila s. Tanseco

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Judgment affirmed with modifications.

Note.As a rule, documentary evidence should be

presented to substantiate a claim for damages for loss of

earning capacity. (People vs. Ballesteros, 561 SCRA 657

[2008])

o0o

G.R. No. 181206.October 9, 2009.*

MEGAWORLD GLOBUS ASIA, INC., petitioner, vs.MILA

S. TANSECO, respondent.

Civil Law; Obligations and Contracts; In reciprocal obligations,

neither party incurs in delay if the other party does not comply or is

not ready to comply in a proper manner with what is incumbent

upon him. From the moment one of the parties fulfills his obligation,

delay by the other begins.Article 1169 of the Civil Code provides:

Art.1169. Those obliged to deliver or to do something incur in

delay from the time the obligee judicially or extrajudicially demands

from them the fulfillment of their obligation. However, the demand

by the creditor shall not be necessary in order that delay may exist:(1) When the obligation or the law expressly so declares; or (2)

When from the nature and the circumstances of the obligation it

appears that the designation of the time when the thing is to be

delivered or the service is to be rendered was a controlling motive

for the establishment of the contract; or (3) When demand would be

useless, as when the obligor has rendered it beyond his power to

perform. In reciprocal obligations, neither party incurs in delay if

the other does not comply or is not ready to comply in a proper

manner with what is incumbent upon him. From the moment one of

the parties fulfills his obligation, delay by the other begins.

Attorneys Fees; Damages; The award of P200,000.00 attorneys

fees and costs of suit is in order, the parties having stipulated in the

_______________

*SECOND DIVISION.
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264

264 SUPREME COURT REPORTS ANNOTATED

Megaworld Globus Asia, Inc. vs. Tanseco

Contract to Buy and Sell that these shall be borne by the losing party

in a suit based thereon.The award of P200,000 attorneys fees and

of costs of suit is in order too, the parties having stipulated in the

Contract to Buy and Sell that these shall be borne by the losing

party in a suit based thereon, not to mention that Tanseco was

compelled to retain the services of counsel to protect her interest.

And so is the award of exemplary damages. With pre-selling

ventures mushrooming in the metropolis, there is an increasing

need to correct the insidious practice of real estate companies of

proffering all sorts of empty promises to entice innocent buyers and

ensure the profitability of their projects.

Damages; Exemplary Damages; Exemplary damages are

imposed not to enrich or impoverish another but to serve as a

deterrent against or as a negative incentive to curb socially

deleterious actions.The Court finds the appellate courts award of

P200,000 as exemplary damages excessive, however. Exemplary

damages are imposed not to enrich one party or impoverish another

but to serve as a deterrent against or as a negative incentive to curb

socially deleterious actions. The Court finds that P100,000 is

reasonable in this case.

Civil Law; Contracts; Since Article 1191 of the Civil Code does

not apply to a contract to buy and sell, cancellation, not rescission, of

the contract is the correct remedy in the premises.Since Article

1191 of the Civil Code does not apply to a contract to buy and sell,

the suspensive condition of full payment of the purchase price not

having occurred to trigger the obligation to convey title,

cancellation, not rescission, of the contract is thus the correct

remedy in the premises.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

Manlangit, Maquinto, Salomon & De Guzman for

petitioner.

Cesar C. Cruz andPartners for respondent.

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VOL. 603, October 9, 2009 265


CARPIO-MORALES,**J.:

On July 7, 1995, petitioner Megaworld Globus Asia, Inc.

(Megaworld) and respondent Mila S. Tanseco (Tanseco)

entered into a Contract to Buy and Sell1 a 224 square-

meter (more or less) condominium unit at a pre-sellingproject, The Salcedo Park, located along Senator Gil

Puyat Avenue, Makati City.

The purchase price was P16,802,037.32, to be paid as

follows: (1) 30% less the reservation fee of P100,000, or

P4,940,611.19, by postdated check payable on July 14,

1995; (2) P9,241,120.50 through 30 equal monthly

installments of P308,037.35 from August 14, 1995 to

January 14, 1998; and (3) the balance of P2,520,305.63 on

October 31, 1998, the stipulated delivery date of the unit;

provided that if the construction is completed earlier,Tanseco would pay the balance within seven days from

receipt of a notice of turnover.

Section 4 of the Contract to Buy and Sell provided for

the construction schedule as follows:

4.

CONSTRUCTION SCHEDULEThe construction of the

Project and the unit/s herein purchased shall be completed and

delivered not later than October 31, 1998 with additional grace

period of six (6) months within which to complete the Project and

the unit/s, barring delays due to fire, earthquakes, the elements,

acts of God, war, civil disturbances, strikes or other labor

disturbances, government and economic controls making it, among

others, impossible or difficult to obtain the necessary materials, acts

of third person, or any other cause or conditions beyond the control

of the SELLER. In this event, the completion and delivery of the

unit are deemed extended accordingly without liability on the part

of the SELLER. The foregoing notwithstanding, the SELLER

reserves the right to withdraw from this transaction and refund to

the BUYER without interest the amounts received from him under

this contract

_______________

**#Designated Acting Chairperson per Special Order No. 690 dated

September 4, 2009.

1HLURB Records, pp. 164-169.

266
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if for any reason not attributable to SELLER, such as but not

limited to fire, storms, floods, earthquakes, rebellion, insurrection,

wars, coup de etat, civil disturbances or for other reasons beyond its

control, the Project may not be completed or it can only be

completed at a financial loss to the SELLER. In any event, all

construction on or of the Project shall remain the property of the

SELLER. (Underscoring supplied)

Tanseco paid all installments due up to January, 1998,

leaving unpaid the balance of P2,520,305.63 pending

delivery of the unit.2Megaworld, however, failed to deliver

the unit within the stipulated period on October 31, 1998 or

April 30, 1999, the last day of the six-month grace period.

A few days shy of three years later, Megaworld, by notice

dated April 23, 2002 (notice of turnover), informed Tanseco

that the unit was ready for inspection preparatory to

delivery.3Tanseco replied through counsel, by letter of May

6, 2002, that in view of Megaworlds failure to deliver the

unit on time, she was demanding the return of

P14,281,731.70 representing the total installment payment

she had made, with interest at 12%per annum from April

30, 1999, the expiration of the six-month grace period.

Tanseco pointed out that none of the excepted causes of

delay existed.4

Her demand having been unheeded, Tanseco filed onJune 5, 2002 with the Housing and Land Use Regulatory

Boards (HLURB) Expanded National Capital Region Field

Office a complaint against Megaworld for rescission of

contract, refund of payment, and damages.5

In its Answer, Megaworld attributed the delay to the

1997 Asian financial crisis which was beyond its control;

and argued that default had not set in, Tanseco not having

made

_______________

2Id., at pp. 148-163.

3Id., at p. 22.

4Id., at pp. 146-147.

5Id., at pp. 13-19.

267
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VOL. 603, October 9, 2009 267


any judicial or extrajudicial demand for delivery before

receipt of the notice of turnover.6

By Decision of May 28, 2003,7 the HLURB Arbiter

dismissed Tansecos complaint for lack of cause of action,

finding that Megaworld had effected delivery by the noticeof turnover before Tanseco made a demand. Tanseco was

thereupon ordered to pay Megaworld the balance of the

purchase price, plus P25,000 as moral damages, P25,000 as

exemplary damages, and P25,000 as attorneys fees.

On appeal by Tanseco, the HLURB Board of

Commissioners, by Decision of November 28, 2003,8

sustained the HLURB Arbiters Decision on the ground of

laches for failure to demand rescission when the right

thereto accrued. It deleted the award of damages, however.

Tansecos Motion for Reconsideration having been denied,9she appealed to the Office of the President which dismissed

the appeal by Decision of April 28, 200610 for failure to

show that the findings of the HLURB were tainted with

grave abuse of discretion. Her Motion for Reconsideration

having been denied by Resolution dated August 30, 2006,11

Tanseco filed a Petition for Review under Rule 43 with the

Court of Appeals.12

By Decision of September 28, 2007,13the appellate court

granted Tansecos petition, disposing thus:

WHEREFORE, premises considered, petition is hereby

GRANTEDand the assailed May 28, 2003 decision of the HLURB

_______________

6#Id., at pp. 24-31.

7#Id., at pp. 136-139.

8#

Id., at pp. 247-250.

9#

Id., at pp. 304-305.

10Rollo, pp. 260-263.

11Id., at p. 264.

12CARollo,pp. 8-55.

13Penned by Associate Justice Vicente Q. Roxas, with the concurrence of

Associate Justices Josefina Guevara-Salonga and Ramon R. Garcia; CARollo,

pp. 692-714.

268
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Field Office, the November 28, 2003 decision of the HLURB Board

of Commissioners in HLURB Case No. REM-A-030711-0162, the

April 28, 2006 Decision and August 30, 2006 Resolution of the

Office of the President in O.P. Case No. 05-I-318, are hereby

REVERSED and SET ASIDE and a new one entered: (1)

RESCINDING, as prayed for by TANSECO, the aggrieved party,

the contract to buy and sell; (2) DIRECTING MEGAWORLD TO

PAYTANSECO the amount she had paid totaling P14,281,731.70

with Twelve (12%) Percent interest per annumfrom October 31,

1998; (3) ORDERING MEGAWORLD TO PAY TANSECO

P200,000.00 by way of exemplary damages; (4) ORDERING

MEGAWORLD TO PAYTANSECO P200,000.00 as attorneys fees;

and (5) ORDERINGMEGAWORLD TO PAYTANSECO the cost of

suit. (Emphasis in the original; underscoring supplied)

The appellate court held that under Article 1169 of the

Civil Code, no judicial or extrajudicial demand is needed to

put the obligor in default if the contract, as in the herein

parties contract, states the date when the obligation should

be performed; that time was of the essence because Tanseco

relied on Megaworlds promise of timely delivery when she

agreed to part with her money; that the delay should be

reckoned from October 31, 1998, there being no force

majeure to warrant the application of the April 30, 1999

alternative date; and that specific performance could not beordered in lieu of rescission as the right to choose the

remedy belongs to the aggrieved party.

The appellate court awarded Tanseco exemplary

damages on a finding of bad faith on the part of Megaworld

in forcing her to accept its long-delayed delivery; and

attorneys fees, she having been compelled to sue to protect

her rights.

Its Motion for Reconsideration having been denied by

Resolution of January 8, 2008,14 Megaworld filed the

present Petition for Review on Certiorari, echoing its

position before the

_______________

14Id., at p. 816.

269
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VOL. 603, October 9, 2009 269


HLURB, adding that Tanseco had not shown any basis for

the award of damages and attorneys fees.15

Tanseco, on the other hand, maintained her position too,

and citing Megaworlds bad faith which became evident

when it insisted on making the delivery despite the longdelay,16 insisted that she deserved the award of damages

and attorneys fees.

Article 1169 of the Civil Code provides:

Art.

1169.

Those obliged to deliver or to do something incur in

delay from the time the obligee judicially or extrajudicially demands

from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in

order that delay may exist:

(1)

When the obligation or the law expressly so declares; or(2)When from the nature and the circumstances of the obligation

it appears that the designation of the time when the thing is to be

delivered or the service is to be rendered was a controlling motive

for the establishment of the contract; or

(3)

When demand would be useless, as when the obligor has

rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the

other does not comply or is not ready to comply in a proper manner

with what is incumbent upon him. From the moment one of the

parties fulfills his obligation, delay by the other begins.

(Underscoring supplied)

The Contract to Buy and Sell of the parties contains

reciprocal obligations, i.e., to complete and deliver the

condominium unit on October 31, 1998 or six months

thereafteron the part of Megaworld, and to pay the balance

of the purchase price at or about the time of delivery on the

part of Tanseco. Compliance by Megaworld with its

obligation is determinative of compliance by Tanseco with

her obligation to pay the bal-

_______________

15Vide Petition,Rollo,pp. 29-74.

16Vide Comment,Id., at pp. 432-465.
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270



ance of the purchase price. Megaworld having failed to

comply with its obligation under the contract, it is liable

therefor.17That Megaworlds sending of a notice of turnover

preceded Tansecos demand for refund does not abate her

cause. For demand would have been useless, Megaworld

admittedly having failed in its obligation to deliver the unit

on the agreed date.

Article 1174 of the Civil Code provides:

Art. 1174.Except in cases expressly specified by the law, or

when it is otherwise declared by stipulation, or when the nature of

the obligation requires the assumption of risk, no person shall be

responsible for those events which could not be foreseen, or which,

though foreseen, were inevitable.18

The Court cannot generalize the 1997 Asian financial

crisis to be unforeseeable and beyond the control of a

business corporation. A real estate enterprise engaged in

the pre-selling of condominium units is concededly a

master in projections on commodities and currency

movements, as well as business risks. The fluctuating

movement of the Philippine peso in the foreign exchange

market is an everyday occurrence, hence, not an instance of

caso fortuito.19 Megaworlds excuse for its delay does not

thus lie.

As for Megaworlds argument that Tansecos claim is

considered barred by laches on account of her belated

demand, it

_______________

17VideLeao v. Court of Appeals, 420 Phil. 836, 848; 369 SCRA 36, 46

(2001). Article 1170 of the Civil Code provides:

Art.1170.Those who in the performance of their obligations are

guilty of fraud, negligence, or delay, and those who in any manner

contravene the tenor thereof, are liable for damages.

18Mondragon Leisure and Resorts Corporation v. Court of Appeals,

499 Phil. 268, 279; 460 SCRA 279 (2005).

19Fil-Estate Properties, Inc., v. Go, G.R. No. 165164, August 17, 2007,
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530 SCRA 621, 628.

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VOL. 603, October 9, 2009 271


does not lie too. Laches is a creation of equity and itsapplication is controlled by equitable considerations.20 It

bears noting that Tanseco religiously paid all the

installments due up to January, 1998, whereas Megaworld

reneged on its obligation to deliver within the stipulated

period. A circumspect weighing of equitable considerations

thus tilts the scale of justice in favor of Tanseco.

Pursuant to Section 23 of Presidential Decree No. 95721

which reads:

Sec.

23.

Non-Forfeiture of Payments.No installment paymentmade by a buyer in a subdivision or condominium project for the lot

or unit he contracted to buy shall be forfeited in favor of the owner

or developer when the buyer, after due notice to the owner or

developer, desists from further payment due to the failure of the

owner or developer to develop the subdivision or condominium

project according to the approved plans and within the time limit

for complying with the same. Such buyer may, at his option, be

reimbursed the total amount paid including amortization

interests but excluding delinquency interests, with interest

thereon at the legal rate. (Emphasis and underscoring supplied),

Tanseco is, as thus prayed for, entitled to be reimbursed the

total amount she paid Megaworld.

While the appellate court correctly awarded

P14,281,731.70 then, the interest rate should, however, be

6%per annumaccruing from the date of demand on May 6,

2002, and then 12% per annum from the time this

judgment becomes final and executory, conformably with

Eastern Shipping Lines, Inc. v. Court of Appeals.22

_______________

20Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, G.R. No.

162033, May 8, 2009, 587 SCRA 417.

21 REGULATING THE SALE OF SUBDIVISION LOTS AND CONDOMINIUMS,

PROVIDINGPENALTIESFORVIOLATIONSTHEREOF.

22#G.R. No. 97412, July 12, 1994, 234 SCRA 78, 96-97. The Court, in

this case, suggested rules on the award of interest, viz.:
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x x x x

272



The award of P200,000 attorneys fees and of costs ofsuit is in order too, the parties having stipulated in the

Contract to Buy and Sell that these shall be borne by the

losing party in a suit based thereon,23not to mention that

Tanseco was compelled to retain the services of counsel to

protect her interest. And so is the award of exemplary

damages. With pre-selling ventures mushrooming in the

metropolis, there is an increasing need to correct the

insidious practice of real estate companies of proffering all

sorts of empty promises to entice innocent buyers and

ensure the profitability of their projects.The Court finds the appellate courts award of P200,000

as exemplary damages excessive, however. Exemplary

damages are imposed not to enrich one party or impoverish

another but to serve as a deterrent against or as a negative

incentive to

_______________

2.When an obligation, not constituting a loan or forbearance of money,

is breached, an interest on the amount of damages awarded may be

imposed at the discretion of the court at the rate of 6% per annum. No

interest, however, shall be adjudged on unliquidated claims or damages

except when or until the demand can be established with reasonable

certainty. Accordingly, where the demand is established with reasonable

certainty, the interest shall begin to run from the time the claim is made

judicially or extrajudicially (Art. 1169, Civil Code) but when such

certainty cannot be so reasonably established at the time the demand is

made, the interest shall begin to run only from the date the judgment of

the court is made (at which time the quantification of damages may bedeemed to have been reasonably ascertained). The actual base for the

computation of legal interest shall, in any case, be on the amount finally

adjudged.

3.When the judgment of the court awarding a sum of money becomes

final and executory, the rate of legal interest . . . shall be 12%per annum

from such finality until its satisfaction, this interim period being deemed

to be by then an equivalent to a forbearance of credit.

x x x x


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23HLURB Records, p. 166.

273

VOL. 603, October 9, 2009 273


curb socially deleterious actions.

24

The Court finds thatP100,000 is reasonable in this case.

Finally, since Article 119125 of the Civil Code does not

apply to a contract to buy and sell, the suspensive condition

of full payment of the purchase price not having occurred to

trigger the obligation to convey title, cancellation, not

rescission, of the contract is thus the correct remedy in the

premises.26

WHEREFORE, the challenged Decision of the Court of

Appeals is, in light of the foregoing, AFFIRMED with

MODIFICATION.As modified, the dispositive portion of the Decision

reads:

The July 7, 1995 Contract to Buy and Sell between the parties is

cancelled. Petitioner, Megaworld Globus Asia, Inc., is directed to

pay respondent, Mila S. Tanseco, the amount of P14,281,731.70, to

bear 6% interestper annumstarting May 6, 2002 and 12% interest

per annum from the time the judgment becomes final and

executory; and to pay P200,000 attorneys fees, P100,000 exemplary

damages, and costs of suit.

Costs against petitioner.

_______________

24Bataan Seedling Association, Inc. v. Republic of the Philippines,

G.R. No. 141009, July 2, 2002, 383 SCRA 590, 600-601.

25 Article1191.The power to rescind obligations is implied in

reciprocal ones in case one of the obligors should not comply with what is

incumbent upon him.

The injured party may choose between the fulfillment and the

rescission of the obligation, with the payment of damages in either case.

He may also seek rescission, even after he has chosen fulfillment, if the

latter should become possible.

The court shall decree the rescission claimed, unless there be just

cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third

persons who have acquired the thing, in accordance with Articles 1385
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and 1388 and the Mortgage Law.

26VideSta. Lucia Realty v. Romeo Uyecio, G.R. No. 176217, August

13, 2008, 562 SCRA 226, 234-235.

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Megaworld Globus Asia, Inc., Petitioner, Vs. Mila s. Tanseco